Benefits For Firms And Investors

Publicly traded companies are subject to the reporting and disclosure requirements of the Securities Exchange Commission (SEC). The laws that govern the securities industry were established to provide transparency to investors, creditors and shareholders alike. According to Hoyle, Schaefer & Doupnik, (2015) there are seven major disclosure requirements, the first being a five-year summary of operations to encompass sales, assets, income from continuing operations. Followed by a description of business activities, a three year summary of industry segments to include foreign and domestic operations, a list of company directors and executives, quarterly market price of common stock for the last two years, restrictions on the company’s ability to continue paying dividends, and finally, an analysis of the company’s financial condition, changes in the conditions and results of operation.

The cause of poor transparency, however, is less important than its effect on a company 's ability to give investors the critical information they need to value their investments. If investors neither believe nor understand financial statements, the performance and fundamental value of that company remains either irrelevant or distorted. Mounting evidence suggests that the market gives a higher value to firms that are upfront with investors and analysts. Transparency pays, companies with fuller disclosure win more trust from investors. Relevant and reliable information means less risk to investors and thus a lower cost of capital, which naturally translates into higher valuations. Of course, there are two ways to interpret this evidence. One is that the market rewards more transparent companies with higher valuations because the risk of unpleasant surprises is believed to be lower. The other interpretation is that companies with good results usually release their earnings earlier. Companies that are doing well have nothing to hide and are eager to publicize their good performance. It is in their best

Lastly, for the portion of domestic antitrust, we will examine the Sarbanes Oxley Act. Enacted in 2002 it increases transparency in accounting. It was designed to prevent accounting errors and fraud in financial disclosures. The SOX act stipulates that the periodic financial reports be carried out in a certain way. The signing officers must review and certify the report prior to release. They are required to make sure all information is clear, true, not misleading and does not omit any important details. The signing officers are also required to evaluate the internal controls and their effectiveness within ninety days of the report. If there are any areas of internal control that are not working or may have issues they must also report this, along with any responsible employees. Finally, they must make sure the financial picture is being fairly portrayed through all of this.

Entity-wide disclosures are required under Accounting Standards Codification (ASC) 280-10-50-40 through 280-10-50-42. The disclosures are required because every corporation does not report information in a similar fashion, and the disclosures would provide comparability of the financial statements among entities. For example, if a corporation uses a geographic approach in its financial statements, disclosing certain information about the products or services sold will make comparability to other companies much easier. The disclosures will also help with comparability within an entity if they decide to choose another method of reporting operating segments in the future. There are three types of entity-wide disclosures; products and services, geographic areas, and/or major customers. Every public company has to comply with the disclosures, even if the company has one reportable segment. The only exception to the entity-wide disclosures is if it is impractical to provide the information, such as it would be extremely costly to the corporation, or if the “internal reporting systems are not capable of gathering financial information by product or service by geographic area.” A disclosure should be made when entity-wide disclosures are impractical.

Since the financial crisis investors have become less confident in the companies within the market. In order to restore confidence within the market and the audits of their financial statements Senator Sarbanes and Representative Oxley created the legislation known as the Sarbanes Oxley Act which came into effect in 2002. The legislation created major regulations on company financial reporting and the regulation of it. Forcing management to be accountable for the financial reporting and internal controls within their company and requiring the audit committees to report on their opinion of the company’s internal processes. (Soxlaw.com)

Most people agree that the SOX Act provides the most comprehensive amendments to the 33 and 34 Acts in United State history. Due to the stricter financial law from the Sarbanes-Oxley Act, other international countries have adopted similar laws such as Australia, France, Germany, India, Italy, Japan, South Africa, and Turkey to help with it came to financial reporting. The SOX Act have 11 mandate and requirement for corporations to report their financial statements. The following are the 11madate titles and requirement under the Sarbanes-Oxley

As a student pursuing a Master's degree at Florida International University, I am aware of the future benefits of receiving a degree of this caliber in regards to career opportunities and compensation. FIU offers a variety of degree programs ranging from bachelor's to doctorates and professional degrees. However, there are existing programs that should be offered at a higher degree level which would significantly benefit graduate students and the university. One particular program that should most certainly be offered to students is a Masters degree in Health Services Administration. The university as well as graduate students are mutually being deprived of a great opportunity, therefore I am writing this memo in efforts to implement a

My recommendation would be to sample years that are passed 2002 and on to get a more accurate result for the study. I felt like there was so much going on with testing before and after the events took into effect. Even though it was a good size of sample and enough quarters from where to gather information from the time frame plays an important role. The Regulation Fair Disclosure that took place in October 23, 2000 made a great impact towards the way information was not allowed to be disclosed. I feel that it took an effect on the results since the information was gathered that year and was dealing with information asymmetry. In Li, Ha and Nabar (2014) they conclude that there is a difference that exists between pre and post regulation fair disclosure. The authors mention how the stock prices after the fact were more precise in relation to stock splits than before regulation fair disclosure took place. Also, with Sarbanes Oxley Act taking effect in 2002 could also have more managers disclosing information more voluntarily than before it took effect. In Aftermath (2015) he states that SOX arose because of the number of scandals that had taken place. So, with this said it shows how the disclosing of information is important and now that it is implemented will help in lowering the risk of having unreliable information. On another note as for the equations that were used throughout the paper I find them quite interesting and understandable. As well as the variables that were used in the tables are clearly defined and the tables do provide evidence to sustain their

Sarbanes Oxley Act known as the SOX Act offer guidelines companies and organizations should conduct their financial reporting. Not reporting balance sheets or financial statements the way SOX

In the article “SOX- Context and Theory: Market Failure, Information Asymmetry & The case for regulation …volume 9(3), Professor Jasso argued that Sarbanes Oxley Act is a principle that be used only for the “ethical and moral boardroom in the public corporation”, however, it is intensely more than that (Jasso, 1). In other words, Professor Jasso had many reasons to proof that the act itself had made a positive impact to the financial and managerial accounting since the ‘July 30, 2002’ (Jasso, 1). He described how SOX had made

SOX also reduced the number of financial restatements. The number of financial restatements before SOX increased steadily. (Coates & Srinivasan, SOX after Ten Years: A Multidisciplinary Review, 2014). When SOX was enacted, there was an immediate hike in number of restatements at the beginning because most of the companies were very cautious at reporting their financial statements (Coates & Srinivasan, SOX after Ten Years: A Multidisciplinary Review, 2014). But it fell back the same way as it went up (Coates & Srinivasan, SOX after Ten Years: A Multidisciplinary Review, 2014). On average, restatements have been less outrageous after SOX. Most of the restatements are just simple errors and ordinary negligence. Also, the market reaction to restatement

Immediately after ratification of SOX, all publically-held companies were required to file a statement of compliance with the Securities and Exchange Commission (SEC). Besides the hundreds and in some cases, thousands of hours that companies invested in getting these initial statements of compliance filed, there was still widespread fraud occurring in publically-held companies begin regulated by the SOX Act (Hemphill, 2005). Unethical companies were able to time their reporting and also devise methods of reporting that still shielded their unethical accounting and finance practices, which made the initial efforts at SOX compliance mediocre in performance at best (Orin, 2008). Meanwhile the many ethical companies had to comply with these reporting requirements and

The Sarbanes-Oxley Act of 2002 in the most general terms is a law passed by the United States Congress to help stop publicly traded corporations and their leaders from committing accounting and financial fraud. The act is made up of various sections but we will go into detail only about a few of them including Section 302, Section 404, Section 409, and section 802 which deal directly with IT (Brown, 2005, 313). Section 302 deals directly with the officers of a company and requires them to “make representations related to the disclosure of internals controls, procedures, and assurance from fraud (Brown, 2005, 313).” In other words, companies will be required to have their CEOs and CFOs sign off on all publicly made financial statements. Also, in a recent survey “44 percent of the companies will require the CIO to certify financial results under SOX compliance (Brown, 2005, 313).” This certification will include the CIO signing a statement attesting to the accuracy of the financial statements as well as the effectiveness of

The Sarbanes-Oxley Act (SOX) was enacted in July 30, 2002, by Congress to protect shareholders and the general public from fraudulent corporate practices and accounting errors and to maintain auditor independence.   In protecting the shareholders and the general public the SOX Act is intended to improve the transparency of the financial reporting.   Financial reports are to be certified by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) creating increased responsibility and independence with auditing by independent audit firms. In discussing the SOX Act, we will focus on how this act affects the CEOs; CFOs; outside independent audit firms; the advantages and a

The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have